Ohio Attorney General Sues Wholesale Mortgage Lender for Alleged Conspiracy with Mortgage Brokers to Deceive Borrowers

In a recently filed lawsuit in Ohio state court, the Ohio attorney general claimed that a wholesale mortgage lender conspired with mortgage brokers to deceive borrowers by emphasizing broker independence, while steering borrowers to the lender’s more expensive loan products.

According to the complaint, the lender, along with brokers in its network, advertised the independence of mortgage brokers as the principal benefit of the wholesale mortgage market.  Unlike a loan officer employed by a retail mortgage lender, the complaint alleges, a mortgage broker acts as a fiduciary to the borrower.  Thus, the complaint maintains, a mortgage broker should be able to identify and present to the borrower a broader range of competitively priced options.

Despite the purported focus of its advertising on broker independence, the attorney general alleges that the lender coerced brokers to direct borrowers to its more expensive loans.  According to the complaint, the lender contractually prohibits any broker who does business with it from shopping for loans with two of its largest competitors and contractually prohibits the broker and buyer from continuing to shop for other loans once it has locked in the interest rate on its loan.

To enforce these restrictions, the attorney general alleges that the lender monitors broker data and sends harassing communications to brokers who appear to be violating these terms or files a lawsuit against the broker if warranted.  Moreover, the attorney general alleges that the lender maintains a website that supposedly helps prospective borrowers find an independent broker, even though a broker must do business with the lender and boycott the lender’s largest competitor to be listed in the directory.  In turn, brokers also allegedly benefit from the scheme by receiving more business and higher commissions from the lender.

Of final note, the attorney general did not name any mortgage broker as a defendant.  The lender has yet to file a motion to dismiss or responsive pleading.